Global financial markets maintained momentum, with the MSCI World All Country Equity Index rising by 2.5% in the second quarter. A consistent theme in the post-pandemic cycle has been the US outperforming the rest of the world, which continued in this period. The S&P 500 index saw a 4.1% increase over the past three months, resulting in a 15.3% gain in the first half of 2024. This performance marks one of the strongest starts to a calendar year since the late 1990s dotcom bubble.
The S&P 500 recorded 31 new all-time highs in 2024, defying Wall Street strategists’ predictions of zero gains at the year’s start. Stock market leadership in the US remains highly concentrated, with the equal-weighted S&P 500 underperforming the cap-weighted S&P 500 since January 2023. A significant factor has been Microsoft’s investment in OpenAI, sparking interest in generative AI technologies. This has increased the influence of the “Magnificent 7” (Apple, Alphabet, Amazon, Meta, Microsoft, Nvidia, Tesla) within the S&P 500, which reached a new high of 32% this quarter.
Apple, Microsoft, and Nvidia have all reached the three trillion-dollar market cap, with Nvidia responsible for one-third of the S&P 500 gains this year. Nvidia’s revenue surged 262% from a year earlier to 26 billion dollars in the three months to April 2024, with a gross profit margin increasing to 78%.
In the UK and Europe, market performance was similar to the first quarter of the year. Equities showed tepid performance, and yields increased as resilient economic data delayed expectations for interest rate cuts. A political surprise came in late May when British Prime Minister Rishi Sunak announced a snap general election for July 4. Across Europe, Marine Le Pen’s National Rally led the first round of French elections, creating political uncertainty. The rise in French government bond yields indicated investor concerns, reminiscent of the 2012 euro area sovereign debt crisis.
Developed market equities, represented by the MSCI World Equity Index, delivered a 2.5% return in the second quarter. The S&P 500 delivered a 4.1% return, while Japan’s Nikkei 225 Index returned -7.3%, primarily due to yen weakness. European equities returned -0.3%, weighed down by a 9.7% decline in France. Emerging markets saw a 4% return, driven by Taiwan and South Korea. China outperformed with a 5.6% return, and India saw a 7.5% return, despite political uncertainties.
Bond markets showed similar price action to the first quarter, with yields ending the quarter close to where they started. The Bank of England’s hopes for a summer rate cut were dashed by high inflation data, while the European Central Bank delivered a quarter-point cut. The Federal Reserve is expected to cut rates in November, which could influence ECB policies.
Gold returned 4.2% in US dollar terms, with central bank buying remaining strong. Energy markets saw volatility, with oil prices rebounding in response to geopolitical risks.
TEAM PLC emphasises the importance of sticking to an investment plan amidst short-term market concerns. The company’s systematic framework has helped navigate market trends and avoid impulsive decisions. Diversification through liquid alternatives like physical gold and energy equities has provided valuable returns.
The third quarter sees TEAM PLC positively positioned, with a focus on equities, particularly large-cap companies in the US and non-US markets. Japan and India are highlighted for their investment potential. In fixed interest, TEAM PLC remains cautious about long-term bonds due to political risks and potential yield increases.
Alternatives and cash, especially physical gold, remain essential for portfolio insurance. The outlook for oil remains uncertain, but TEAM PLC’s systematic investment process aims to navigate market conditions effectively, providing respectable risk-adjusted returns for investors.
TEAM PLC’s investment approach in the second quarter of 2024 demonstrates a commitment to strategic planning and diversification, ensuring resilience in a complex market environment.
